Stakeholder Magazine Nov. 2005

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Creating value for customers, employees and shareholders

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LATEST THINKING: NATURE’S THREADS PART 2 - PAGE 16 SOCAP IN EUROPE ANNUAL CONFERENCE - PAGE 20 COBRA BEER: BUILDING A CONSUMER BRAND FROM SCRATCH - PAGE 24 EMPOWERMENT: HOW FAR DARE YOU GO? - PAGE 31

PLUS NEWS - PAGE 7 THE BALANCED SCORECARD - PAGE 8 FAST GUIDE - PAGE 35 BOOK REVIEW - PAGE 36

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November 2005 VOLUME 2 ISSUE 4 £4.50

Sewell’s Ten Commandments of Customer Service Cadillac - PAGE 11

T

20

06

CONFERENCE

UK CUSTOMER SATISFACTION Sponsored by

Thursday 2nd February 2006

The

Chelsea Football Club, London

What is important to UK customers? New research unveiled!

The

Robert Crawford

Nigel Hill

Nigel Hill, founder of The Leadership Factor and Robert Crawford, Executive Director of Institute of Customer Service and previously Head of Service Quality at Royal Bank of Scotland, will be discussing the latest information about the requirements of UK customers

Fan satisfaction at Chelsea Football Club Peter Kenyon is Chief Executive of Chelsea Football Club and the highest profile sports executive in the UK. Peter will be talking about why customers service and satisfaction matter in football

Service strategy at VISA Europe Graham Parker-Gore, Head of Customer Implementation Services at VISA Europe will talk about why customer service has never been more important and how constant monitoring and continuous focus are the keys to making improvement

Powerful branding demands the truth BJ Cunningham, leading brand expert as well as provocative and entertaining speaker, will talk about how corporate reputation affects customer satisfaction and loyalty and the steps companies should take to protect and build it

Book online at

www.leadershipfactor.com or email charlotteratcliffe@leadershipfactor.com for further information

01484 467004

6

November 2005

Diary Dates

24 Brand Building a consumer brand from scratch

Seminars and Conferences from around the country

7 News Building Societies reward loyal savers

8 The Balanced Scorecard Article 2: Putting it into practice

by Ray Robertson 11 Case Study

31 Employee

Carl Sewell’s Ten Commandments of Customer Service

How far dare you go?

35 Fast Guide Fast guide to Benchmarking satisfaction

R

In this issue...

VOLUME 2 ISSUE 3

36 Book Review

16 Latest Thinking

Part 2

from patterns

stry the tape

20 Customer

Stakeholder November2005

3

Customer Satisfaction Measurement

Customer Satisfaction Measurement

Level 1

Level 2

A practical one day seminar that will take you step-by-step throuh the process of accurately measuring your customers’ satisfaction.

This seminar examines the more advanced research techniques relevant to Customer Satisfaction Measurement (CSM) and is suitable for people wanting to develop or critically assess their existing process.

The day covers

The day covers A robust measurement for tracking Measuring Importance Sample reliability How many questions?

Complaints and problems Benchmarking Timing and frequency

Questionnaire design Sampling Methodology Analysing & reporting Satisfaction Index Pitfalls to avoid Dates 8th February 2006 15th February 2006 21st January 2006 28th February 2006 28th March 2006 27th April 2006

London Leeds Bristol Manchester Birmingham Luton

Dates 23rd November 2005 27th March 2006 11th May 2006 18th May 2006

London Manchester Manchester London

Cost: £325 excl VAT

Cost: £295 excl VAT

Over 4000 delegates have attended worldwide Presenters are also authors of leading books in the area of customer satisfaction & loyalty

ed

mit i l e

c Pla

e

s ar

For more information and a detailed agenda: CALL RUTH COLLETON on

01484 467000 Book online at

www.leadershipfactor.com

The

F A C T O R L E A D E R S I N S AT I S F AC T I O N M E A S U R E M E N T

Charlotte Ratcliffe editor

What makes organisations successful?

Obviously, anyone who knows the answer and could bottle it and sell it would be very rich. Well, bottling and selling Cobra Beer has already made Karan Bilimoria rich and most commentators seem to think he’ll be getting richer in the future. There’s no doubt that Bilimoria got some of the real strategic essentials right. First and foremost he launched his business into a growth market, two in fact - lager and Indian food. Almost as important, for a small new business he didn’t go head to head with the big established players but focused on a niche, Indian restaurants, and built his business on meeting their special requirements. Getting the strategy right will help enormously to get you off the ground, but won’t be enough by itself to deliver long term growth and profitability. Read the article on page 24 to see how Cobra Beer motivates employees and listens to customers as well as getting the branding right and innovating continuously.

Employees As we all know, delivering results to customers starts with employees. Don Hales founded the National Customer Service Awards and on page 31 he provides some great examples (from companies as diverse as Friends Provident and Ladbrokes) of the difference empowerment makes to employees’ ability to deliver results to customers. If they do that they should be rewarded. In the latest instalment of the Balanced Scorecard, Ray Robertson explains how to integrate employee rewards with balanced scorecard measures.

Stakeholder is the magazine for people who want their organisation to deliver results to employees, customers and any other stakeholders as part of a coherent strategy to create value for shareholders. We publish serious articles designed to inform, stimulate debate and sometimes to provoke. We aim to be thought leaders in the field of managing relationships with all stakeholder groups.

Editor: Assistant Editor: Contributors

Charlotte Ratcliffe Alison Howes Nigel Hill Stephen Hampshire Ray Robertson Don Hales Rob Ward Designer: Creative Director: Rob Egan Louise Martin Advertising: Editorial Director: Janet Hill

Customers Strategy, innovation, branding and motivated employees are all vital to an organisation’s success, but as Harvard keep reminding us, it’s the ability to use those strengths to deliver results to customers that really makes the difference.

Motorway service stations are not the first places that would spring to mind as paragons of customer satisfaction. If you’re one of the sceptical many, turn to page 20 to see what Road Chef are doing. I think you’ll be surprised. By contrast, Sewell Cadillac is already recognised worldwide for its superb customer service. Carl Sewell just speaks a lot of common sense. But you know he’s right. Starting on page 11, this edition’s cover article is full of ideas that you can use immediately to make a difference to your customers’ satisfaction.

Printers of Stakeholder magazine info@stakeholdermagazine.com Stakeholder Magazine PO BOX 1426 Huddersfield HD1 9AW Tel: 0870 240 7885 NB: Stakeholder does not accept responsibility for omissions or errors. The points of view expressed in the articles by attributing writers and/or in advertisements included in this magazine do not necessarily represent those of the publisher.

Whilst every effort is made to ensure the accuracy of the information contained within this magazine, no legal responsibility will be accepted by the publishers for loss arising from use of information published. All rights reserved. No part of this publication may be reproduced or stored in a retrievable system or transmitted in any form or by any means without prior written consent of the publisher.

Copyright © STAKEHOLDER MAGAZINE 2004

ISSN 1749-088X Stakeholder November2005

5

Diary Dates

Diary dates February Masterclass 2 - The Seven Deadly Skills of Customer Service 2 February 2006 - Edinburgh

Improving Employee Satisfaction 15 February 2006 - London 22 February 2006 - Manchester

This class will show you how to ensure your organisation focuses on delivering value to customers - across multiple channels - and help you deliver real customer value into your business.

If you buy into the idea of satisfying your employees, having a robust employee survey is essential. This one day seminar is a practical step-by-step guide to creating an employee survey that links to your customer measures, and ultimately to business success.

www.cim.co.uk Tel: 0131 473 7777 The Annual Customer Satisfaction & Loyalty Conference 2006 2 February 2006 - London The day includes a combination of insightful case studies and latest developments in theory, focusing on customer satisfaction and loyalty. www.leadershipfactor.com Tel: 01484 467004 Customer Satisfaction Measurement Level 1 8 February 2006 - London 15 February 2006 - Leeds 21 February 2006 - Bristol 28 February 2006 - Manchester This one day seminar takes delegates stepby-step through the process of using customer surveys to accurately measure customer satisfaction. Includes instruction on relevant research techniques, group exercises and opportunities to ask questions relating to your own organisation's customer satisfaction measurement practices. www.leadershipfactor.com Tel: 01484 467000 Improving Customer Satisfaction 9 February 2006 - London This one day seminar is designed for those who want to make sure that they are getting the most from their customer satisfaction survey results. The seminar examines in detail the strategies that work to improve your customer satisfaction and motivate staff to maintain their focus on it. www.leadershipfactor.com Tel: 01484 467000

6

April

Stakeholder November2005

www.leadershipfactor.com Tel: 01484 467000

March Business South 2006 1-2 March 2006 - Southampton A unique business-to-business show that includes a wide range of exhibitors, seminar, features, enterprise zones and a useful Meet the Buyer section. An ideal opportunity to showcase your products and services, no matter what industry you specialise in or your company size. www.business2businessshows.com Tel: 01823 250930 Customer Satisfaction Measurement Level 2: Advanced Techniques 27 March 2006 - Manchester Designed as a follow on from our best-selling seminar 'Customer Satisfaction Measurement' (Level 1), this seminar examines the more advanced research techniques of relevance to Customer Satisfaction Measurement (CSM) and is suitable for people wanting to develop or critically assess their existing process. www.leadershipfactor.com Tel: 01484 467000

HRD 2006 - The CIPD Annual Learning, Training and Development Conference and Exhibition 4-6 April 2006 - London HRD is the largest and most influential event for busy professionals to keep up to date on the latest issues and innovations in learning, training and development. www.cipd.co.uk IoD Annual Convention 2006 26 April 2006 - London This year's forum offers you an opportunity to explore the many different elements of inspirational leadership, including the strategies and experiences of leading companies and individuals. www.iod.com Tel: 020 7766 8919

May The European Conference on Customer Management 2006 15-18 May 2006 - London Europe's largest event on Customer Management includes 10 keynote speakers, new Customer Loyalty & Retention Summit with special keynote address by Philip Kotler, 42 case studies and brand new research. www.ecustomerserviceworld.com Tel: 020 7915 5103

June Customer: Strategy & Management 2006 21-22 June 2006 - Birmingham Customer 2006 is an event for customer service, sales, marketing and senior corporate management who are developing strategy and sourcing product and service suppliers to help them identify, win, satisfy, retain and grow profitable customers. www.customer-event.co.uk Tel: 020 7921 8522

News

news

New Logo to Demonstrate Higher Levels of Customer Service

Approved code The Office of Fair Trading (OFT) has launched a new scheme to identify businesses that are genuinely committed to providing higher standards of service for their customers. This scheme is designed to enable consumers to ‘buy with confidence’ in the knowledge that they will be treated properly should anything go wrong unexpectedly.

Research carried out by the OFT showed that over 75% of consumers would value a logo that displayed this promise of increased customer service and many said that it would influence which company they would choose to buy from.

Consumers buying a range of products from companies such as travel agents and estate agents are expected to benefit from this new scheme.

Portman Building Society is expected to please many of its long-term customers by offering a favourable savings interest rate to those who have held a savings account with them for at least 3 years.

Portman’s group development director, Matthew Wyles, commented: ‘We are determined to direct the fruits of our success specifically at our most loyal and committed members.’

research carried out by e-service provider Transversal. The research found that 66% of consumers could not find the relevant answers to their questions on retailers’ web sites. The main factor that leaves customers disgruntled is poor online product information, with many people simply cancelling transactions or switching to competitors if they can’t find the information they require.

This represents a significant loss in revenue for those companies that fail to provide the relevant information for customers.

Different Perceptions on Mobile Working

Similarly, West Bromwich Building Society has implemented a scheme whereby long-term investors are rewarded with growing interest rates over time. This means that savers will see the interest rate rise on their investment to new guaranteed higher levels over fixed periods of time.

Customers Less Satisfied with e-tailers

Building Societies Reward Loyal Savers

Most UK employers fail to encourage mobile working according to new research by You Gov and T-Mobile.

Employees from a range of different business sectors were questioned about mobile working. The public sector was the least likely to encourage mobile working whereas the IT sector was found to be the most likely to support it. The majority of employees would favour the opportunity to work this way, as it would enable them to work while commuting, when and where they want and they could spend fewer hours in the office each week. Businesses could also benefit from increased efficiency and a more flexible workforce.

Online customers are increasingly feeling let down by e-tailers, according to

Stakeholder November2005

7

The Balanced Scorecard

Article 2: Putting it into practice by Ray Robertson, Director, Strategic Reward In the July 2005 issue of Stakeholder, we explored the beginnings of balanced scorecard. The scorecard devised by Kaplan and Norton comprises four perspectives: financial, internal business processes, customer, and learning and growth. But how do organisations actually go about designing and implementing balanced scorecard? Research studies (Ref1) into the practices of experienced users of balanced scorecard found that success depends on three things: customisation, employee awareness and links to reward.

Customise design Balanced scorecard design should come directly from an organisation’s vision, strategy and values. But what if these are vague, perhaps in the minds of the leadership team, rather than written and communicated? For these organisations the process of developing balanced scorecard has as much influence on strategy as strategy has on balanced scorecard (Ref2).

Virtually all organisations form a team of senior managers or directors, which has responsibility for developing the initial version of balanced scorecard. The team often co-opts middle-level managers from business areas who are knowledgeable about specific processes and requirements. Rather than start from scratch, most teams modify the Kaplan and Norton scorecard model, using new measurement categories that represent the interests of important stakeholders, for example customers, or corporate values such as teamwork and innovation.

8

Stakeholder November2005

This “customisation” principle applies to selecting performance measures for each scorecard perspective too. While Kaplan and Norton (Ref3) found in relation to customer outcomes for example, a core set of measures which included customer retention, customer satisfaction and customer profitability, across many organisations, there is considerable variation in the type of performance measures in all perspectives. Crucially, people affected by balanced scorecard must be able to influence the performance measures in it. For the leadership team that’s usually taken for granted. But when balanced scorecard is cascaded through the organisation, everyone should understand the connection between scorecard and what they are expected to do in their daily work. When people don’t understand the connection, balanced scorecard or any other performance measurement system, will eventually fail.

Giving business units considerable scope to translate a company scorecard into a unit scorecard, while maintaining a common focus throughout the

organisation, helps communicate to employees what matters most, in terms they understand. Tesco’s version of balanced scorecard, for example, called “Steering Wheel”, guides managers in everything they do. (diagram right)

Raise employees’ awareness So, if balanced scorecard highlights key areas of business focus, it’s not just an important measurement tool - it’s a powerful communications one too. This is especially the case when balanced scorecard is intended to introduce a new set of values - values focusing on aspects such as customer value, innovation, environmental safety and employee development.

The first communications challenge is to create general awareness of the balanced scorecard among all employee groups that are affected. Publishing the scorecard with company or business unit targets and progress towards them, in prominent places in the organisation or in company

The Balanced Scorecard

Balanced Scorecard Bonus Plan journals, is a good way of doing so. Some organisations actually publish targets and performance in public areas, for example, reception. That says a lot about the importance they attach to delivering scorecard measures. Team briefings and one-to-one employee-manager meetings are particularly useful for making scorecard “real” for small groups of people and individuals. But organisations need to know the degree of awareness, and that’s when carrying out some employee research is useful. Employees might be asked to respond to statements such as:

I am aware of the performance targets in the company’s balanced scorecard I don’t know our department’s performance targets Our team uses balanced scorecard to discuss team performance, but does not fully accept it Our business unit is totally committed to balanced scorecard Data from this type of research has an impact on the third success factor - link balanced scorecard and reward - and how fair it’s perceived to be.

Minimum

100

110

120

Score

Profit

40%

80

90

100

110

120

48

Customer Satisfaction

20%

80

90

100

110

120

20

Productivity

30%

80

90

100

110

120

33

Employee satisfaction

10%

80

90

100

110

120

9

Total Score Link scorecard and reward While organisations continually look for ways to refine their strategy and improve performance, one of the best ways to get employees’ attention about “what matters most” is to link reward and results. That’s why many users of balanced scorecard make reward linkages quickly, usually when balanced scorecard is introduced rather than at a later date when performance measurement has been “perfected”. Short-term incentives are generally the most effective pay delivery tool for rewarding the successful achievement of scorecard objectives.

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In the example above, performance on all perspectives - which are weighted differently - is linked to bonus. A bonus pool is generated only when the target profit is reached (100). The total score (weighted average across all four measures) is 110. This is linked to a payment scale, starting from 100, which pays a bonus of 1% of salary for each 1% above a total score of 100. The maximum bonus is 20% of salary. Other schemes generate a bonus pool only when the target profit has been exceeded. A proportion of the amount above target, say 50%, forms the bonus pool.

Assuming there are four performance measures, 25% of the bonus pool is paid out for exceeding the profit target. An additional 25% of the pool is paid out for reaching each of the other three measures, but if one of these isn’t achieved, that 25% is reinvested in the business. S References 1. T Manas: “Making the Balanced Scorecard Approach Pay Off”, ACA Journal Second Quarter 1999 2. Mavrinac and Vitale: “The Balanced Scorecard Pioneers: Lessons in Performance Measurement Innovation”, Richard Ivey School of Business, University of Western Ontario, 1998 3. Kaplan and Norton: “The Balanced Scorecard”, Harvard Business School Press, 1996

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Raymond Robertson Director Strategic Reward Ray can be contacted at team@strategicreward.com

Stakeholder November2005

9

for a G r

De l i v erin g

10

Stakeholder November2005

Case Study

When Carl Sewell joined the family firm in 1967 it was third out of three Cadillac dealerships in Dallas. Today it’s the biggest in America, $450million big, and all built on Sewell’s Ten Commandments of Customer Service. His principles work across the full market spectrum from Chevvys to Cadillacs and from Hyundais to Lexuses and will almost certainly apply just as well to solicitors, utilities, hotels, supermarkets - or any other business that wants its customers to keep coming back. In fact, ‘Customers for Life’ is what Carl Sewell has called his excellent book explaining the Ten Commandments (see below). In this article Nigel Hill examines some of the amazing customer service feats that have been perpetrated in their name.

The Ten Commandments of Customer Service 1. Bring ‘em back alive Ask customers what they want and give it to them again and again.

2. Systems not smiles

4. When the customer asks the answer is always ‘yes’ Period.

Saying please and thank you doesn’t

5. Fire your inspectors and consumer relations’ department

ensure you’ll do the job right first time,

Every employee who deals with clients must

every time. Only systems guarantee

have the authority to handle complaints.

Baseball teams do it. Football teams do it.

Basketball teams do it. You should too.

8. Salaries are unfair Pay people like partners.

9. Your mother was right Show people respect. Be polite. It works.

you that.

3. Under promise, over deliver

7. Measure everything

6. No complaints? Something’s wrong

10. Japanese them

Customers expect you to keep your

Encourage your customers to tell you

Learn how the best really do it; make their

word. Exceed it.

what you’re doing wrong.

systems your own. Then improve them.

Stakeholder November2005

11

Case Study

Sewell claims that his most important

For a little more insight into the workings

decision was resolving to be the best -

of this paragon of customer satisfaction,

initially the best rather than the worst

let’s

performing dealership in Dallas. As well as

Commandments.

briefly

examine

the

Ten

"If custo mer were a c service ake, the politene ss, smile s and willingne ss to go extra mil the e would be the ic The cake ing. would be systems the that allo w you to do a g ood job."

galvanising everybody, he claims it’s made all decisions much simpler ever since because all business decisions have been made on the same basis - “will doing this make us better? If it will (and if there’s any

Commandment 1.

Bring ‘em back alive “The customer will tell you how to provide good service”

conceivable way to afford it), we’ll do it. If

When he had only one dealership, Carl

it won’t we don’t.” All he had to do then

Sewell was a great believer in MBWA

was decide how to do it. He soon

(Management By Walking Around) but

abandoned price as the way, pointing out

once his sites started to increase he

want you to do is get the basics right, and

that there will always be someone who’ll

realised he couldn’t spend enough time

for that you need systems. Systems for

charge less, ‘because they’re smarter

wandering around each location, so he

doing things right first time, and systems

(they’ve figured out a way to be more

now uses the customers as his eyes and

to

efficient) or dumber (they don’t know what

ears. Listening to customers involves a

inconvenience to the customer if you

their costs are).” To help him decide,

very short 3-question card that all

don’t. Most of these Sewell copied not

Sewell decided to consult customers who

customers are asked to complete whilst

from

soon told him what they didn’t like, from

waiting to pay, a 49 question postal

manufacturers, the organisations he

inconvenient 8-5 opening hours to rude

survey (that gets a 35% response rate)

considered

employees and from poor cleanliness to

and focus groups. Sewell believes what

Commandment 10)

having to bring their car back because the

the customers say and acts on it,

repair

replacing the general manager at Hyundai

“If customer service were a cake, the

when it came to light (through focus

politeness, smiles and willingness to go

groups) that service customers were

the extra mile would be the icing. The

Having understood what was important to

dissatisfied with the availability of loan

cake would be the systems that allow you

customers, Sewell set out to do best what

cars.

to do a good job.”

hadn’t

been

done

correctly.

Especially the last one.

recover

other

quickly,

at

dealerships best

at

minimal

but

systems

from (See

mattered most. He extended the opening hours to over 12 hours a day and all day Saturday. He introduced loan cars - they now have 300. Most importantly he learned

12

from

the

best

(see

Commandment 2.

Systems not smiles “Systematic approaches are 80% of customer service”

Commandment 3.

Under promise, over deliver “Always present a bill that at the very least is $1 less than the estimate”

Commandment 10) to get things right first

Sewell is very dismissive of customer

time for the customer. In other words, they

service gloss - smiles, “have a nice day”,

At Sewell they add a 10% cushion to

got the basics right. And that’s always the

answering the phone in two rings etc.

estimates so they always meet the “at

best way to satisfy customers.

He’s adamant that what customers really

least $1 less” rule. This either allows them

Stakeholder November2005

Case Study

to do extra work “for nothing”, if they see something that needs doing or, if the job is plain sailing, reduce the final bill by the full amount of the ‘cushion’. They don’t worry about putting off the people who shop around as they will probably always

Commandment 5.

Fire your inspectors and consumer relations’ department

hassle of sorting out something that

“Don’t pay people twice for the same job”

immediately. Both done by the mechanic,

should have been done right first time.

Sewell’s two golden rules are first, apologise, or

then

fix

salesperson

the

who

problem

was

initially

be switchers, going to whoever is

At one time Sewell believed that the way

responsible. They don’t believe in letters,

charging a few dollars less. Sewell’s

to guarantee right first time quality for the

and only very rarely in bunches of roses

strategy isn’t to be the cheapest. It’s to be

customer was to inspect everything. He

for really big problems, maintaining that a

the best.

later realised that it makes people take

genuine

less

because

rectification is what most customers really

Commandment 4.

When the customer asks the answer is always ‘yes’

somebody’s always going to check it

want. Sewell’s final advice on complaints

before it goes out. In addition, the

is to make it easy for customers to

business records and investigates every

complain and build a culture where

or “Sure thing”

single return or problem and wherever

everyone

possible fixes the system as well as the

opportunity to improve.

pride

in

their

work

Part of Sewell’s strategy of being the best

problem to minimise the chances of a

is to make the customer’s life as easy and

repeat occurrence. And the mechanic,

hassle free as possible - a great benefit to

salesperson, or whoever was responsible

many of today’s time poor consumers. If a

for the original job deals with the

good customer loses his keys and locks

customers

himself out of his car, the business will go

ownership of solving the problem, hence

and sort it out, whatever time of day or

no customer relations’ department.

and

personally

takes

night, and without thinking about the cost.

That almost always results in a customer for life. As Sewell points out, the cost of a typical radio ad is probably twenty times greater than the cost of getting that customer back on the road - and how

sees

and

immediate

complaints

as

an

Commandment 7.

Measure everything “Accounting for more than money” People like keeping score and companies need to keep score. Obviously on the

Commandment 6.

No complaints?

Something’s wrong.

“Criticism from customers is more valuable than praise”

many customers for life will they get from a radio ad?

apology

money but also on anything else of importance to the objectives of the business. Of course, objectives have to be fair and realistic (individuals must not be given too many objectives) but they must also be measurable. It’s not enough to

Believing that customers take good

encourage people to do their best and hope

service for granted but really remember

it will be good enough, so you have to have

“If we’re able to help our customers they’ll

how you handled a problem, Sewell treats

objective measures for all the key result

want to do business with us again and

every complaint as a serious one.

areas and make them public and prominent

again”

However minor a complaint is to the

within the business. Assuming you want to

supplier it is serious to the customer

develop rather than stagnate or decline, you

because they’ve got all the unnecessary

also have to keep raising the bar.

Updated in 2002, “ Customers for Life” has sold over 800,000 copies worldwide. There are many stories of successful business leaders using it as their bible and buying copies for all their staff.

It is eminently readable with short chapters, plenty of anecdotes and no management science gobbledygook. Just common sense principles that work. At £7.53 from Amazon it works out at about 3p per page! It’s hard to think of a better £7.53 you’ll ever spend.

Stakeholder November2005

13

Case Study

ally e natur ry r a le p "Peo hey'll t titive. T er goals e p m o c tev ed wha er or to exce them, wheth for . The are set 're paid more y not the is to set goals r est sec et in the b e r a t tha t of the interes ss" busine

performance related salary. By contrast,

McDonald’s, a staff sales incentive

the sky should be the limit for the earnings

scheme modelled on American Airlines

of those who really contribute to the

AAdvantage programme, booking in

success of the business.

systems from Marriott and cleanliness from Disney. Ideas usually need to be

Commandment 9.

Your mother was right

adapted

“If you want employees to be polite to your customers, you have to be polite to your employees”

help you to deliver better results for

As we said earlier, the smiles are only the

The $332,000 customer

for

the

business,

but

benchmarking outside your industry will customers as well as gain a competitive advantage.

icing on the cake, but that does not mean that staff shouldn’t smile. Just the

Sewell’s 10 Commandments all stem from

opposite in fact, because customers

his belief in Customer Lifetime Value - the

Commandment 8.

Salaries are unfair

always appreciate it when you go the

3Rs of retention, related sales and

extra mile - friendly welcome on arrival,

referrals. At Sewell, the right customers

“Pay more willingly - but that extra money is not a gift”

carry things to their car for them etc.

are worth $332,000 each. So as well as

Sewell tells many stories of lapsed

having systems and a culture that delivers

customers who returned, not because

results to all customers, you really need to

Very strenuous recruitment procedures

they didn’t like their other car but because

know who the $332,000 customers are.

result in the best people who get paid

they didn’t like the way they were treated

This applies to recruitment (don’t recruit

more than they could earn elsewhere but

by the dealer.

the price sensitive switchers) as well as

really do have to earn it. Sewell really does

retention. Everybody should know who

pay for performance advocating that everybody should be on “commission, piecework or a percentage of the net”.

Pay for performance also extends to staff not being paid for any rectification work.

People not comfortable with the totally

the best customers are and should make

Commandment 10.

Japanese them

sure that everything is just right for them.

“Borrow, borrow, borrow.

Why re-invent the wheel?

Just improve it”

recommending you to their friends - each

Then they keep coming back as well as one of whom is another potential $332,000 customer. S

strict performance-related pay scheme

Examples of Sewell’s borrowings include

will end up working elsewhere, for a non-

hard

wearing

floor

tiles

used

by

Nigel Hill Managing Director The Leadership Factor www.leadershipfactor.com email: info@leadershipfactor.com

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Last time Stepen Ha mpshire looked at th e tricks our minds us (mostly correct) judge e to leap to ments about the ca usal processes going world around us. In on in the this article Stephen addresses the techn for applying a more iques that exist rigorous analysis to causal processes, sta what we actually mea rting with n by causation.

What is causation?

It is actually surprisingly difficult to arrive at a satisfactory definition. To keep it very brief we can say that a causal link exists if, 1 other things being equal , when the cause happens so does the effect. Or, alternatively, the presence of the cause makes the occurrence of the effect more likely. Normally we can also assume that the cause should precede the effect in time, unless we’re in a science fiction film or you’re talking to a philosopher or a quantum physicist.

Types of causes Not all causes are the same. Necessary causes mean that the effect cannot happen without them, but they do not necessarily mean that the effect will happen. For example the presence of oxygen is a necessary cause of a fire, but there isn’t always a fire when oxygen is around.

Sufficient causes are those that guarantee the effect if they happen.

However a sufficient cause isn’t necessarily the only cause, so other things could also have made the effect happen.

An electrical fault may be a sufficient

cause for a fire, but it is not a necessary cause since there are lots of other potential causes (cigarettes, candles etc).

In many cases a number of causes must combine in order to achieve sufficiency understanding these interactions is a key part of successful causal modelling.

It’s also important to consider the impact of potential causes that have a negative relationship with the effect - causes that prevent or suppress the effect.

Philosophies of causation The necessary cause was the first to occur to philosophers looking for a definition. Hume first proposed the idea that a cause can be defined as something that, if it hadn’t happened, then neither would the effect. This, known as counterfactual causation, is useful as far is goes, but it simply doesn’t work in a lot of cases. If causality was a nice deterministic relation like this then a cause would always lead to its effect, but smoking doesn’t always lead to lung cancer. Does that mean I should go back to 40 a day?

Clearly something doesn’t add up.

Nowadays the most popular way of dealing with causal thinking is probabilistic

2 t r a P

y tapestr e h t s from pattern

causation - in other words the presence of a cause, such as smoking, increases the probability of an effect rather than necessarily leading to it. This can capture the idea of multiple potential causes, with effects sometimes not following from causes, and the interactions between causes to achieve sufficiency. Depending on your philosophical outlook, probabilities reflect either the inherently uncertain nature of causal relationships or our shallow knowledge about systems that are fundamentally deterministic but very complex. Probabilistic thinking is formalised in the techniques that form the basis of most causal modelling in practice, such as Structural Equation Modelling.

A probabilistic approach to causation lends itself perfectly to these techniques.

It reflects the fact that causal links can be of different strengths, and it is the relative strength of different potential drivers that causal research is normally trying to investigate. Most statistical models are mainly used to provide estimates of effect size, as this is what will aid in decision making. In other words, if I do X how much more likely is Y? Or if we

increase X by 10% what will happen to Y? Sometimes not enough care is

A: This is not just a phrase, the ceteris paribus assumtion is fundamental to establishing the nature of any complex causal relationship

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Latest Thinking

taken to assume that the model itself is valid, which can lead to some erroneous answers.

You may be wondering what we mean by probabilities. If the thought of coins flipping and the lottery are giving you cold sweats don’t worry, it’s really pretty easy.

Probabilities are based simply on how often things happen. If 20% of nonsmokers get lung cancer and 70% of smokers get lung cancer then you have a 20% chance of getting lung cancer if you don’t smoke and a 70% chance of getting lung cancer if you do. Of course these probabilities can be “wrong” in the 2 individual case , but they are true on average. More powerfully it may be possible to show that every step up in terms of the number of cigarettes smoked daily results in a X% increase in the probability of getting lung cancer.

The language of probabilities can get very complex, but fortunately the graphic techniques that have been developed to illustrate and aid causal thinking tend to be much easier to interpret. If all we had were equations then even a mildly complex causal structure would be very difficult to envisage:

Z = B5V + B6Y + B7X Y = B1V + B2W + B3X X = B4W ...where the various Bs represent effect

V

sizes and the other letters are variables.

The same information can be neatly and intuitively represented at the bottom of the page. It’s a bit like the difference between a map and several different sets of directions.

Statisticians have been very wary of causal claims, preferring to use the term “association”. Because of this techniques for the formal expression of causal thought are only just being developed.

The reluctance to consider causality explicitly has hampered researchers in terms of statistical techniques and has resulted in much research, paradoxically, that has placed inappropriate reliance on statistical techniques that aren’t up to the job rather than an emphasis on solid study design. The status quo in social science modelling is a bad compromise under attack from not only traditional statisticians but also experts in cuttingedge causal reasoning.

Building causal research studies So much for the theory, where does that leave us in terms of making decisions in the real world? Formal causal research is still young, and often seems primitive compared to our own ability to reach common sense judgements. Judea Pearl, one of the leading thinkers on causality, has commented: “We all understand that the rooster’s crow does not cause the sun to rise, but even this simple fact cannot

B5 B1

Y

B2

W

B6

B3 B4

X

B7

Z

easily be translated into a mathematical equation.” [1] The late 19th century discovery of correlation as a technique for measuring the strength of relationship between two variables represented the first time we were able to objectively assess the strength of such links. Notice that there is no suggestion of causation, only a relationship (and even that may be spurious). Traditionally, and many statisticians still argue this, the only way to examine causation with statistics is by means of a randomised experiment.

Experiments Randomised experiments are simple in theory, but often difficult or impossible in practice. The principle is that in order to study the effect of the variable we are interested in we must make sure that that is the only thing that varies between a test group and a control group (ceteris paribus again). We can do this by randomly allocating people to one group or the other.

Drug trials work in this way - we split our “guinea pigs” in half at random and then give one group the drug to be tested and the other group a placebo or a current drug. Participants don’t know which group they are in. Ideally we would also avoid the researcher being aware which group was which - a “double blind” experiment.

Nonetheless many studies do reach causal conclusions without using randomised experiments, including, for example, the initial studies linking smoking and lung cancer. Ethical considerations make it impossible to randomly allocate people to undergo something which is suspected of being a serious health hazard.

When first published the smoking studies

B: Stephen Jay Gould’s “The Median isn’t the Message” makes this point very powerfully after discovering he had a predicted lifespan of eight months

[http://www,cancerguide.org/median_not_msg.html]

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Latest Thinking

were attacked by the tobacco industry, as you might expect. What seems more surprising now was that they were also attacked by a number of prominent statisticians on the basis that the supposed causal link might be spurious, resulting from an unmeasured variable that caused both smoking and lung cancer. It was suggested that there might be a genetic predisposition both to enjoy smoking and to be susceptible to lung cancer.

This is a perfectly plausible hypothesis. It is accepted that other types of cancer have a genetic factor in their causes, and it is also suspected that there is a genetic predisposition to enjoy smoking. So how was it disproved? Not with regression or factor analysis but by conducting largescale studies with identical twins where only one twin smoked - capitalising on a natural experiment that would rule out a genetic factor. A remarkably difficult exercise, but the only sure way to rule out the alternative hypothesis.

Statisticians, unlike many research practitioners, are very wary about the use of certain techniques (notably regression and factor analysis) in a causal context.

The misuse of such techniques is probably what makes them uncomfortable with the use of causal terminology in any context other than randomised experiments. The result is described by Pearl: “...in the bulk of the quantitative statistical literature, causal claims rarely appear in the mathematics. They surface only in the verbal interpretation that investigators occasionally attach to certain associations.” [2]

Smoking and lung cancer, alternative hypotheses: The observed correlation

Smoking

Cancer

was consistent with two competing hypotheses (plus others!). More work was needed to support the hypothesised link.

Smoking

Genotype Cancer

Smoking

The reason it is so difficult to restrain social scientists from using regression is that it seems to do exactly what we need - it determines the unique effect of a number of causes on an outcome variable, assessing statistically the effect each cause would have if all the other causes were held constant. When experiments are not feasible, models are the best thing we’ve got to work with, and multiple regression is what most people plump for most of the time.

David Freedman is one of the most prominent critics of the automatic and thoughtless use of regression models in causal studies. He points out that the main distinguishing feature between compelling work like Snow’s cholera study (covered last time) and less persuasive studies is not the techniques

of all false The origin of all science is the desire to know causes, and the origin none; or, than rather causes false accept to science and imposture is the desire ce. ignoran own our ledge acknow to gness which is the same thing, in the unwillin William Hazlitt

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Cancer

used but the “...investment of skill, intelligence, and hard work....” [3]. He is suspicious, justifiably, of the ability of regression models to statistically control for the complexities of a real world causal relationship.

Interestingly his negative view of the standard regression approach to causal studies is echoed by some of the leading lights in the development of causal modelling techniques: “In the absence of very strong prior causal knowledge, multiple regression should not be used to select the variables that influence an outcome or criterion variable in data from uncontrolled [i.e. non-experimental] studies.” [4] Clark Glymour, an expert on causal modelling in psychology, is particularly damning of the use of such methods.

Discussing reactions to “The Bell Curve” which used standard tools of social science research to reach some very uncomfortable conclusions he comments: “The unstated problem for many commentators is how to reject the particular conclusions of The Bell Curve without also rejecting the larger enterprises of statistical social

Latest Thinking

science....The hard issue is whether the methods of large parts of social science are bogus, phony, pseudoscientific. They are. The other hard issue is whether there are better methods....There are.” [5]

Drawing reliable causal conclusions So the uncomfortable truth is that the familiar tools used by the majority of causal studies are fatally flawed. The substitute should either be much more robust new techniques (and thinking) or carefully designed experiments. Failing that we must treat any prospective causal findings very cautiously indeed. In a classic discussion, Sir Austin Bradford Hill clearly outlined his criteria for moving from association to causation, including:

Strength Consistency Specificity Temporality Dose-response curve Plausibility Coherence His conclusion is worth repeating in full, as it underlines the fact that the key to drawing reliable conclusions lies not in the statistical techniques we use, but in the way we think about what the results can and cannot tell us: “I do not believe...that we can usefully lay down some hard-and-fast rules of evidence that must be obeyed before we

No formal tests of significance can answer these questions. Such tests can, and should, remind us of the effects that the play of chance can create, and they will instruct us in the likely magnitude of those effects. Beyond that they contribute nothing to the ‘proof’ of our hypothesis.” [6] This has several key applications to the building of causal models: 1. “Fit” statistics tells us only that there is no significant evidence against our model 2. Statistical significance means that the size of an association is too big not to exist in the population, but that’s all 3. Every model has alternatives which need to be considered. Many of these are mathematically indistinguishable - why have we preferred one over the others?

Bibliography [1] Judea Pearl, “Causality” [2] J« udea Pearl, “Causal Inference in Statistics: A Gentle Introduction”

[3] David Freedman, “From Association to Causation: Some Remarks on the History of Statistics”

[4] Peter Spirtes, Clark Glymour & Richard Scheines, “Causation, Prediction, & Search”

[5] Clark Glymour, “The Mind’s Arrows” [6] Austin Bradford Hill, “The Environment and Disease: Association or Causation?”

Conclusion Reaching causal conclusions from social data is, at best, a difficult problem. Most studies use inadequate techniques that are vilified by experts across the spectrum of statistics. In practice it is not always possible to use techniques that are more reliable, but careful thought needs to be given to studies in order to eliminate possible sources of error (for example it is easy to remove the possibility that a causal link should be reversed if the cause happens before the effect).

Where regression models are used for

Stephen Hampshire Development Manager The Leadership Factor If you have any thoughts about this article you can contact Stephen at: stephenhampshire@leadershipfactor.com

“All models are wrong, but some are useful.”

George Box

can accept cause and effect. None of my nine viewpoints can bring indisputable evidence for or against the cause-andeffect hypothesis and none can be required as a sine qua non. What they can do...is help us make up our minds on the fundamental question - is there any other way of explaining the set of facts before us, is there any other answer equally, or more, likely than cause and effect?

causal inference the best reassurance will be if their predictions are confirmed in practice. If they are able to predict the outcome of an intervention then it is likely they have accurately caught a real causal relationship. It is this proven ability of a model to be useful that inspires confidence in it. It may still not be exactly right, but it is at least doing us some good! S

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Customer

Coinciding with National Customer Service Week, SOCAPie (Society of Consumer Affairs Professionals in Europe) hosted its annual two day conference at The Tower of London on October 2nd and 3rd.

session. What a good decision that was - the guy’s a natural. He should be hosting a TV chat show! Following some very sensitive questioning by Derek and polite questions from the audience, it appears that the main lessons learned by Rachel are:

1) Don’t overstretch yourself - A £5 million contract with Tesco was great to win but with hindsight Rachel didn’t think its margins were sufficient to cover the operational strain imposed on the business.

Roadchef Invests in Customer Satisfaction

2) Choose your team carefully especially if you are stepping back from the day to day. Lack of unity and commitment to the original Red Letter Days vision may have hampered the company’s endeavours to overcome its difficulties.

Of huge interest was the first day appearance of Rachel Elnaugh as keynote speaker. Rachel had been booked before the much publicised collapse of Red Letter Days and it is testament to her courage that she didn’t cancel despite a further hauling over the coals the previous Friday, this time on Tonight with Trevor McDonald.

SOCAPie CEO, Derek Williams decided to run the slot as a question and answer

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3) Watch the numbers - make sure you’ve got a good Financial Director and keep your eye on margins and profitability at all times.

Rachel did her image no harm by the open and frank way she answered all the questions. If you want to form your own opinion watch the second series of Dragon’s Den starting this month on BBC2.

On Monday morning Martin Grant, CEO at Roadchef gave a very interesting and witty talk on introducing one of Britain’s three big motorway services operators to the idea of satisfying customers.

With a background that included Marks & Spencer, ASDA and Allied Domeq, and only 18 months into his new role,

Customer

r the o f e u en The V rope u E n i ocap S 5 0 20 rence e f n o lC Annua

The T

ower

Martin was very honest about the challenges he faced. His story of dragging sceptical managers to first believe in the customer satisfaction measures, then address the issues and finally seeing customer satisfaction improve was a blueprint that would be recognised in many other companies.

It’s also a story that should inspire anyone trying to improve customer satisfaction against the odds. A 24/7 service obligation, young staff working unsocial shifts at inaccessible locations, a dreadful reputation, huge peaks and troughs in demand and customers whose only objective is getting out as quickly as possible!

The first thing Martin discovered when he arrived at Roadchef was that they had no customer satisfaction information whatsoever. He quickly introduced a programme, branded

of Lo

“Moments of Truth” involving: Exploratory research involving focus groups to design a customer satisfaction questionnaire of relevance to customers. (Martin “There’s only any point being good at what matters to customers!”)

Customer satisfaction tracking producing fortnightly results (to keep staff on their toes) based on a composite index, weighted towards customers’ most important requirements.

Customer satisfaction related pay for management and staff, supported by prizes and celebrations for outstanding performance. (Results can be broken down to precise operational units).

A set of values to guide staff behaviour: Smile - first impression Shine - cleanliness and presentation

ndon

Read and recognise - anticipate the individual’s requirements Recommend - up selling Support - anyone serving a customer - Training involving three days off site for all staff to build customer service skills and teamwork.

- Communication - to keep the spotlight on customers, including a weekly staff magazine, noticeboards, letters in pay packets and celebratory events.

In the first year Roadchef’s customer satisfaction index has risen from 79% to 86% with half the sites achieving 90% or above. Martin admits that his priority is now to improve consistency across sites and to relaunch the CSM processes, taking the opportunity to raise the bar to avoid complacency creeping in. The process will also be extended to cover new brands. Martin clearly sees branding as the way forward, even re-naming the company ‘Roadchef Costa Coffee’ to circumvent the Government’s signage restrictions.

However, he sees customer satisfaction as the cornerstone of the business and driving it as his own top

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Customer

Some

comp

atte

of th

anie

nded

priority. Hardly surprising because he knows it pays. He certainly wouldn’t have persuaded his hard nosed venture capital shareholders to agree to his £3/4 million p.a. customer satisfaction programme unless they saw it as an investment rather than a cost!

The Gospel According to Harvard That Value Profit Chain stuff gets everywhere! As well as Roadchef’s total focus on delivering results to customers as the best way of delivering results to shareholders, the most noticeable theme of the conference was the proliferation of Harvard teachings across other speakers’ businesses. Here are a few examples:

John Lewis Partnership Customer Service Manager, Andrew McMillan quoted endless examples of best practice at John Lewis that could have come straight out of the Value Profit Chain, including:

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Empowerment of customer facing staff to do what they need to do to deliver results to customers.

Branded “Random Acts of Kindness” and recognised widely within the company, stories like ‘the Partner who carried the old lady’s shopping down the street and onto the bus’ could have come straight out of Nordstrom.

Recruit for attitude, train for skills.

“You can turn great people into good retailers but you can’t always turn great retailers into good people.” To maintain the culture John Lewis also follows the line that

e

s tha

t

bad fit staff should be swiftly removed. “Hire for attitude, fire for attitude” can include saying goodbye to a new Partner within four weeks if they don’t smile enough!

Recognition. Those who do smile and do fit are recognised and handsomely rewarded. Managers are encouraged to “catch Partners doing something right”; an instant recognition scheme inspired by ‘The One Minute Manager’ reviewed in Stakeholder Satisfaction, Volume 2 Issue 2 (March 2005). The John Lewis employee ownership scheme

Customer

provides tangible rewards too - a profit share of 14% of salary for all staff this year. Delivering results to employees must work. Their staff turnover is only 23% - half the retail average.

The Partner Customer Profit Circle.

Shown in the diagram on page 22, this one is straight out of the Sears case study. John Lewis has even adopted and adapted the Sears vision - “a great place to work, a great place to shop”, and a few million people in the UK seem to agree with that!

Eaga Partnership One of the fastest growing companies in the North of England, energy efficiency business Eaga Partnership has clearly borrowed heavily from Harvard best practice case studies. Like John Lewis

it is employee owned and clearly believes in the Value Profit Chain principles of profit resulting from customer and employee satisfaction.

Director of Service Excellence, Annette Rowe, outlined her service beliefs including ‘recruit for attitude, train for skills’ and ‘treating staff like customers’.

This is managed through the Employee Opinion Survey which results in a Leadership Index for all managers, against which they are judged. Learning and development is fostered by the Eaga Academy and Annette underlined the company’s belief in “training your talented people” - invest in staff who’ll make the biggest difference to the company’s future.

Delivering results to customers is promoted by encouraging all staff to put themselves in the customer’s shoes

through Customer Journey Mapping, empowering them to do whatever is necessary to satisfy customers (Ritz Carlton) and “asking permission to say no” (Southwest Airlines). All this is celebrated through the Eaga Oscars on the last Friday of each month, a chance to recognise employees that have gone the extra mile for customers or colleagues and to have some fun! Last but not least is Eaga’s strong belief in “visible top management” based on Harvard’s teachings that the single most motivating factor for most staff is contact with their leaders.

Westminster City Council Assistant Director of Customer Relations, Jan North, devoted her entire presentation to explaining Westminster’s strategy of delivering results to customers - based on common sense principles - “customers don’t want a relationship with us, they just want us to do the things they want us to do.” Fully cognisant of the Harvard principle that investing in customer satisfaction reduces the cost of service, the council is striving to improve the customer experience whilst retaining one of the lowest rates of council tax in the UK. And here’s a great common sense idea for achieving both - when they realised that most calls concerning the library service were about opening hours they simply inserted the opening times in every library book. Happy customers lead to happy council tax payers! S

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Brand

Chartered Management Institute National Convention 27th and 28th October 2005, Leeds At the end of October several hundred managers descended on the Queens Hotel in Leeds for the Institute's first National Convention. It was a very intensive two days with 41 workshop options, a formal dinner, breakfast sessions and three keynote speeches, not to mention the now ubiquitous 'networking opportunities'. The highlight, however, was surely the keynote speech from Karan Bilimoria, founder and CEO of Cobra Beer, whose insightful talk is reported in this article.

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The son of a general in the Indian army, Karan Bilimoria came to the UK as a young post-graduate, starting his career at Ernst & Young in 1982, where he spent four years qualifying as a Chartered Accountant. He then studied law at Cambridge and it was whilst a student there that he first had the idea for Cobra beer.

B Mr Billimoria wants to take on the big beer labels

ilimoria maintains that the best business ideas stem from passion - loving something passionately or hating something with a passion. Bilimoria loved beer, but hated lager, especially the kind he found in England as the universal accompaniment of Indian food. In 1990 he left Cambridge with a Law degree, a ÂŁ20,000 debt and a business idea to develop a non-gassy lager to complement Indian food. He was planning to enter the most competitive beer market in the world at the start of the worst recession we've had in the UK over the last 20 years.

Needless to say, he got little encouragement from family, friends or the business community who all thought he was mad. In that context, you can understand the origins of the Cobra vision, "Aspire and achieve against all odds with integrity".

England. Still there were problems. When the first container of beer was being test marketed in Indian restaurants in the UK it appeared that customers loved the taste but didn't like the name. Not Cobra, but Panther Beer, which was Bilimoria's original choice for the brand name. Never too proud to listen to the market, the name was changed to Cobra despite the costs already incurred for design and packaging and the inevitable delays that resulted from re-doing it all.

Changing the brand name isn't the only evidence that Bilimoria was market-led from the outset. He didn't go into beer just because he liked drinking the stuff.

His Ernst & Young training ensured that he'd thoroughly researched the market, the figures in the two charts showing that perhaps he wasn't quite as mad as many people thought.

Market led Not knowing anything about beer, apart from how he wanted it to taste, Bilimoria returned to India, where he struck a deal with the country's largest independent brewer (Mysore Brewery, also the Indian army's beer supplier), to develop the product, manufacture it and export it to

Having a good product in a growth market is always going to be a winner but Bilimoria went one better than that. He targeted a niche market that was not well served by the competition and where he had a clear USP - beer for Indian restaurants brewed in Bangalore.

100

80

60

40

20

1%

50%

1960

1990

60%

0

Figure 1: Lager’s share of the UK beer market 26

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2000

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£m 9000

£8,500m

8000 7000

£6,000m

6000 5000 4000

£3,000m

3000 £1,200m

2000 1000

£600m £300million

0 1950

1960

1970

1980

1990

2000

Figure 2: Growth of the UK market for Indian food Financing the business

Success

Sales growth was slow in the early years (it took 5 years to hit £1 million sales) and like many start-ups finance was the biggest challenge for Bilimoria. He had financed the initial product development and launch phase with a £55,000 loan through the Government's Small Firms Loan Guarantee Scheme. Before long more cash was needed to finance growth but despite numerous attempts, Bilimoria couldn't find a bank willing to extend his Small Firms loan by the £250,000 he now needed, until he finally found an astute bank manager who believed in Bilimoria's business plan but didn't like the idea of being the only one who did, so he asked what the business was worth. Bilimoria plucked a figure of £1million out of thin air.

The bank manager's canny response was that if he could raise £50,000 by selling shares in 5% of the company, the loan was his. Raining venture capital would have been comparatively easy, but at a much higher cost. Giving away 30% of the company would have been more likely. Eventually Bilimoria was introduced to a business angel who was prepared to invest £50,000 for a 5% shareholding.

When Cobra Beer floats, which it currently plans to do on AIM next year, the business angel could be looking at up to a thousand fold return on his early investment. Not bad going, but still not as good as Bilimoria himself, because although he relinquished more share in 1995 to secure an injection of a further £3.5million, he still owns 72% of the company.

Cobra Beer is now one of the fastest growing beer brands in the UK, with a current turnover of £80 million and around 200 employees. It is available nationwide in more than 6,000 Indian restaurants, major supermarkets and off-licences and now mainstream bars, pubs and clubs.

Cobra Beer is exported to over 30 countries and now has offices in India, South Africa, and the USA as well as HQ in London.

Cobra was listed on the 1999 Virgin Fast Track 100 list of the fastest growing, privately owned companies in the UK. Founder and Chief Executive, Karan F. Bilimoria CBE, DL, has been honoured with the RSA Albert Medal, and as Business Person of the Year by the London Chamber of Commerce; Best Business Leader by the Sage Business Awards 2004 in partnership with The Daily Telegraph; Entrepreneur of the Year 2004 by the National Business Awards, London and South East England; Entrepreneur of the Year 2003 by the London Chamber of Commerce; 2003 London Entrepreneur of the Year (Consumer Products), and Entrepreneur of the Year 2003 by the Asian Achievers Awards. He is also CoChairman of the Indo-British Partnership and Visiting Entrepreneur at the Centre for Entrepreneurial Learning at Cambridge University.

Great place to work For the past two years, Cobra has been

R

included in the top 50 'best places to work' in the small company category.

Bilimoria is a great believer in Harvard's 'recruit for attitude, train for skills' policy, re-named 'hire for will rather than skill' at Cobra. The culture is cosmopolitan, relaxed (no dress code, no fixed hours of work) and inclusive (all employees can join a share option scheme). It's a priority to foster an environment where ideas can flourish and, where appropriate, be implemented quickly. The idea of the month scheme is judged by different, randomly selected members of staff each month. A recent winner was the idea to have three large clocks in the reception area showing the time in the UK, India and the US to remind all staff every minute that the Cobra is now becoming a global business.

Photo: Bilimoria receiving his Business Person of the Year Award from the London Chamber of Commerce

Partnerships Although the company has grown very strongly over the last ten years, the number of permanent staff is surprisingly low - around 230 for an £80milion turnover company. This is down to Bilimoria's strong belief in out-sourcing everything, although he maintains that Cobra's relationship with suppliers is one of genuine partnership. From the earliest days in Bangalore, product development, manufacture and distribution have all

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been outsourced, with Cobra now brewed in Bedford, Poland, Belgium and Holland as well as India. Bilimoria would be the first to admit, however, that outsourcing isn't all plain sailing. With the growing popularity of Cobra in the mid90s, Bilimoria found that shipping the beer over from India was swallowing up 50% of management time in organisation and administration. The obvious solution was to brew in Britain. But would this be acceptable to customers? It had always been assumed that the beer's 'Indianness' was a crucial part of its brand identity. Bilimoria therefore decided to consult customers before making any changes. Thousands completed some simple response cards asking them to rank in order of importance four key characteristics of Cobra Beer:

Community

• Brewed in India • Less gassy • Premium lager • Smooth taste

support events by giving away our product for free as a donation in kind.'

Over the years, Cobra Beer has given away around £100,000 worth of beer at a variety of charitable events. But the generosity also serves as a good marketing opportunity. 'It's a win-win situation,' Bilimoria maintains.

It transpired that Cobra's least important characteristic for customers was being brewed in India. Decision made. Bilimoria placed his businesses with the Bedfordbased, family-owned firm Charles Wells, which also makes Jamaican Red Stripe and Japanese Kirin Beer. It took six attempts, says Bilimoria, for the UK brewery to get it right, but the partnership has worked very well since.

Bilimoria's advice is to always appoint the best advisors and then work very closely with them. Many of Cobra's partners, for example, attend its AGM. Although this will be costly, it is far less costly than employing all that expertise permanently within the company.

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Bilimoria has always had a strong sense of corporate social responsibility.

'Wherever your business is, you must reach out and be outward looking and give back to the community,' he says.

'Every business can do that. From our very early days we've been able to

ASPIRE AND ACHEIVE AGAINST ALL ODDS WITH INTEGRITY The Cobra vision

Bilimoria also supports a number of charities and acts as a business adviser.

These include the Thare Machi Starfish Initiative, which fights prostitution and slavery in the developing world; Rethink Severe Mental Illness; The Memorial Gates Trust; and the Shrimati Pushpa Wati Loomba Memorial Trust for the education of children of poor widows in India. To quote Bilimoria again, 'More and more in Britain we are demonstrating that it is not just important to be the best in the world, but the best for the world. So many businesses are putting back into and engaging with the community.'

Innovation Another of Bilimoria's strong beliefs is constant exposure to new ideas to drive innovation. He is a member of the Hoffman Group, (named after the famous 'achieving the impossible' bridge over the Grand Canyon), whose meetings judge their success in terms of IPH - ideas per hour. One outcome has been King Cobra, the world's first ever double fermented lager. There are now also award winning non-alcoholic and draught beers. When Bilimoria found it difficult to get his message across to the thousands of Indian restaurants in the UK due to the absence of targeted media he simply started his own. Tandoori Magazine now goes to all Indian restaurants.

Another great example of Cobra's innovating culture is its own brand General Bilimoria wines, named after Karan's father. The idea was germinated at Cobra's 1999 management retreat

Brand

when someone suggested the growth in wine consumption was a threat to the beer market. After a brief debate of ideas to counter it by encouraging people to drink beer rather than wine, it was soon decided that jumping on the bandwagon made much more sense than trying to derail it, especially when subsequent research identified that whilst 35% of customers in Indian restaurants chose to order wine with their meal, 50% of wine available in Indian restaurants was very cheap, low quality house wine.

Following an extensive search they found a Merlot and Terret-Sauvignon from the renowned Languedoc region in the south of France and by November of the same year had their first General Bilimoria wines on the tables of UK restaurants. The first wine sold out within months of its launch and the portfolio was expanded at the beginning of 2001 with the launch of three new wines from the same region including a Marsanne-Roussanne and a Syrah. In 2002, three premium quality South African varieties were added to the range: Pinotage, Colombard-Chardonnay and a Shiraz-Pinotage. The Pinotage is produced in the Stellenbosch region by Beyers Truter, and Oliphants River, on South Africa's Western coast, is the home of both the Colombard-Chardonnay and Shiraz-Pinotage. A range of Spanish wines from the coast of Valencia, have been added in 2004, along with a Chenin Blanc from South Africa.

General Bilimoria wines are now selling in excess of 350,000 bottles a year, and are available in hundreds of Indian restaurants throughout the UK, including two Michelin-starred restaurants, and are also

available to order online. The full General Bilimoria range of wines are now also sold in restaurants in India, the United States and South Africa. As well as a profitable new revenue stream the new line has enabled the company to provide a valuable new benefit to its Indian restaurant customers who can now make more money from offering a better quality wine.

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continued growth. The market has been steadily expanding, but Bilimoria points out that Indian per capita consumption of 0.6 litres a year (compared to 98.7 litres in the UK) is still very low. A partnership with Mount Shivalik Group, the largest independent brewing company in India will, almost a decade and a half after the Cobra brand was first developed in India, again brew the beer under licence on the

Figure 3: The Cobra Multiplier Matrix Strategy for continued success Bilimoria's attendance on Harvard senior management courses has clearly not been wasted. The Ansoff origins of his 'Cobra Multiplier Matrix' will be recognisable to many strategic marketing students, but you still won't find many better strategy frameworks.

sub-continent, but this time for India's rapidly growing domestic market. Local production will allow the company to avoid excessive import duties. Will he succeed? He has with everything else so far. No doubt AIM investors wil be taking a keen interest next year. S

Bilimoria sees the Indian market providing the next big opportunity for Cobra's

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HOWFAR DAREYOUGO? Empowerment is not a new concept in customer service but Don Hales, founder and chairman of the judges of the National Customer Service Awards, has discovered from this year's finals that more companies than ever are releasing staff from strict rules and providing more freedom to act on their own initiative, allowing them to provide real service in response to customer needs. But how far can you go and what happens if you go too far? In this article Don relates the experiences of several of this year's finalists and winners, who have benefited from empowering their staff.

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Employee

NOT EVERYTHING THAT COUNTS CAN BE COUNTED AND NOT EVERYTHING THAT CAN BE COUNTED COUNTS

Albert Einstein

The idea of empowering staff may not be terribly new but many companies find it difficult to release power to frontline and, by definition, often quite junior staff. The main concerns expressed are often that staff might make mistakes, their decisions may prove unnecessarily expensive and there may be a lack of consistency between one staff member and another.

In truth, many management teams are just reluctant to release power to junior colleagues. Perhaps they see it as a threat to their own positions or just feel that they worked their way to the top to earn the right to make decisions, so why should they give that power away?

Benefits of empowered staff Benefits arising from empowering staff to make decisions are convincing. The most important should be that customers can get instant satisfaction and, as a consequence, are more likely to remain as customers and purchase more products and services. The cost of acquiring new customers to replace those that could be lost without empowered staff should be brought into the equation when considering the cost that empowered staff might incur.

Additionally, empowered staff are undisputedly more fulfilled and therefore liable to stay longer thereby improving still further the customer service offered and, of course, reducing staff acquisition costs. Finally empowered staff that are able to make instant decisions reduces operational costs as meetings, reports and call backs are avoided, all of which contribute further to the bottom line.

National customer service awards The theme of greater empowerment leading to improved customer service came through very strongly in this year's National Customer Service Awards with many stories of service improvement, increased customer and staff retention and, perhaps surprisingly, proof that empowered staff do not result in profits being given away as a result of over generous compensation for errors and omissions.

The most effective empowerment initiatives concentrate on empowering "freedom of thought" rather than just passing on the right to make

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Employee

judgements from a limited range of options. As a result staff used their freedom to get to understand their customers and their real requirements and this often produces imaginative and cost-effective solutions.

Friends Provident Nowhere in the National Customer Service Awards was this point more graphically illustrated than at the Individual Customer Service Contact Centre at Friends Provident in Salisbury, an old established financial services organisation with a long and proud tradition and, arguably, until recently an old-fashioned view on staff control.

In order to provide excellent customer service from their contact centre at Salisbury, they subjected all new staff to a thorough two-week intensive training course before they went into the contact centre to start really learning the job by listening to colleagues' calls and eventually making their own calls, monitored by a "buddy". The course went through detailed instructions covering what to say and how to deal with just about every situation they might be likely to encounter. Every reaction was scripted, and designed to provide the most effective service for the customer. Like many contact centres they found that staff turnover was high which meant that there was a continuous need to repeat the expensive and tedious training sessions.

This would have been acceptable to the company if research had shown that customer satisfaction was high but a survey carried out showed that they ranked only 10th out of 11 comparable financial service companies, as well as revealed to their surprise that customers thought the service was pretty mundane. As a result they decided to reduce the initial training from two weeks to just two days (covering essential information, such as compliance) and they asked the team to treat the customers as "friends" (particularly appropriate in view of the company name) and to deal with them accordingly.

The results have been startling. Customer satisfaction rose appreciably, ranking them now 3rd out of 11 with anticipation of further improvements, and staff attrition has similarly improved. Bear in mind the cost saving from the reduced training courses (both in length and frequency) and the benefits are immediately obvious.

Keith Mansfield, Head of Individual Customer Services, sums up the success by telling the story of one of the advisors. Before they brought in the new philosophy, she was on a final disciplinary written warning for occasionally using too familiar terms to address customers. She sometimes called them "dear" or used first names or nicknames, instead of the approved "Mr, Miss or Mrs" stipulated in the manual.

She explained that she only did this when she could sense that it was an appropriate term to use in order to put customers at ease, whilst dealing with their queries. The old regime did not like it. In the new environment she has blossomed, becoming the winner of their first "Customer Service Advisor Award" based on customer and colleague feedback.

RAC Rescue Another outstanding finalist in this year's awards was Jason Burrell a patrolman with RAC Rescue. Jason explained to the judges during his presentation that he regularly provides service for customers outside his work remit. One example came when he went to the assistance of a lady whose vehicle had broken down on the motorway. She was very distressed, not so much about her vehicle but because she was overdue at the school where she was due to pick up her two children.

She knew that they would be worried by her nonappearance and she was concerned for their safety.

Realising the importance of his customer's priorities, Jason left the broken down car and drove his customer to the school to pick up the children and leave them with a trusted friend. He then returned to the vehicle with the customer and completed the repair. Yes, it took longer than it would otherwise have done but the customer needs were clearly satisfied and can anybody doubt that the customer will remain loyal for many years to come?

Jason gave several other examples of going beyond his normal role to provide extra service. There was the disabled driver who, after a period in hospital could not start his vehicle on his drive. Unsurprisingly, his battery was flat. Recharging the battery was a straightforward task but upon hearing that the customer was due to re-enter hospital for some further treatment, he made a point of revisiting when in the area and starting the vehicle so that everything would be working when the customer was finally discharged from hospital.

There was also the case of the elderly motorist who broke down due to a faulty alternator. Jason took the customer and vehicle home. Strictly speaking, Jason's job ended there but he could sense that the customer would have difficulty getting someone to come out and fix the car. The next day, in his own time, he went to visit the customer and offered to purchase a new alternator and, charging only for the cost of the part, he fixed it for the customer.

How do the RAC view Jason's activities which clearly stray outside those laid down in the operation anual?

Well Jason reports all his activities, so they certainly

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Employee

which w a s awarded the title of "Top Shop" from over 2,000 by

know all about his deeds, and they have made him reigning "Patrolman of the Year" (out of 1,500).

He has every reason to assume therefore that RAC fully approve of his use of his empowerment.

Yorkshire Water Yorkshire Water is another organisation that has done a fantastic job in empowering all of their staff and encouraging their business partners who work with their customers to do the same.

The result is that if a field engineer has reason to call on a householder for one reason or another, he will not hesitate to effect a repair, like a dripping tap, whilst on the premises despite the fact that it has nothing to do with the purposes of the visit - the engineer makes the decision there and then, without reporting back to the office for authority. Some years ago, Yorkshire Water had a poor reputation for customer service and staff turnover was high. Today they are acknowledged as one of the country's most admired utility companies, staff morale is high and attrition is minimal.

Ladbrokes The final example of empowerment in this article comes from, what to many might seem an unlikely source of great customer service with staff entrusted with the power to break rules - Ladbrokes, the bookmakers. The staff at Ladbrokes are continually encouraged to make decisions to provide extra service based upon their interpretation of local needs. Annette Williams manages the Normanby shop,

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Ladbrokes and was finalist in the Retail Customer Service Team of the Year in the National Awards. Annette organises events, can refund bets if she or her team think the situation warrants such action and provides tea or coffee for regulars. One of her colleagues, Rueben Casco from the Millfield North London shop, won the "WOW! of the Year� Award in the National Customer Service Awards with dozens of nominations from the public. He even used his initiative to track down one of his customer's stolen motorbike!

Freedom of thought All of the above examples, taken from presentations made during the finals of the Awards, demonstrate well-motivated staff endeavouring to provide great service on behalf of their companies who have the sense and trust to empower their staff. They are however, the exception rather than the rule. Today there are still too many organisations that insist on adherence to elaborate procedures that have to be obeyed to the letter.

S u c h

companies often rely heavily on measuring every activity and use the

measurements as evidence of their continuing efficiency.

Perhaps such organisations would do well to remember the words of Einstein, when he said: "Not everything that counts can be counted and not everything that can be counted counts".

Current wisdom tells us that we are moving towards an era where the power in the customer service relationship is moving towards the customer and there are many examples, largely made possible by eCommerce, of companies adapting to the environment where the customer armed with power and knowledge really will be "king". Those companies finding it difficult to empower their own staff may find it impossible to thrive in a world where they will be forced to empower their customers. S

About the Author Don Hales, Founder and Chairman of judges of the National Customer Service Awards is an author and presenter on customer issues and can be contacted on 07850 874120 or at don.hales@questmedia.com

Fast guide

Fast guide to Benchmarking satisfaction

Organisations are increasingly interested in benchmarking their performance in all aspects of business management, hence the growing popularity of externally audited balanced scorecards such as EFQM and Malcolm Baldrige. Some areas of business performance lend themselves much more readily than others to comparison against other organisations. Whilst many tangible metrics such as sales per employee, debtor days, staff turnover can be easily benchmarked across companies and sectors, measures generated by surveys are typically much more tricky to compare.

The main difficulties arise from use of different methodologies and from asking different questions.

Different methodologies If different methodologies are used benchmarking is impossible. There is no way of comparing a measure of customer satisfaction generated by one company using a 10-point numerical scale, for example, with one produced by another organisation using a 5-point verbal scale.

Anyone wishing to change from one scale to the other whilst maintaining some tracking comparability can do so only by duplicating several questions on the same questionnaire with the same sample, comparing the outcomes as a percentage of maximum and calculating a weighting factor accordingly.

Different questions If you have asked exactly the same questions as another company using the same methodology you can obviously compare the answers to the questions.

However, unless all aspects of your operation are identical to those of the comparator company you are very unlikely to be comparing accurate measures of satisfaction since we know that asking the right questions based on the lens of the customer is a fundamental element of a measure that truly reflects how satisfied or dissatisfied customers feel. Put simply,

unless you use the same criteria that the customers use to judge your organisation, your survey will never arrive at the same satisfaction judgement as them so you will almost inevitably be asking different questions, even compared with businesses in your own sector.

How to compare Quite simply, and logically, you should make comparisons in the same way that customers do. At the overall level customers make judgements based on the extent to which suppliers have met their requirements - whatever those requirements are. The most reliable measure of overall customer satisfaction is therefore a composite index with the individual components weighted according to their importance to customers. You can therefore compare this measure of “the extent to which you are meeting customers’ requirements” with the satisfaction index of any other organisations across all sectors.

Comparisons across sectors In fact, it is essential to compare across sectors since this is precisely what customers do. Customers typically base their expectations on the best service they have encountered across the wide range of different suppliers they use from all sectors. Moreover, many successful organisations pursue best practice benchmarking outside their own sector as they see this as a much better way of making a paradigm shift than if they look across their own industry where companies are broadly doing the same things. For example, Southwest Airlines achieved the fastest airport turnaround time in its industry by benchmarking itself against Formula 1 teams in the pits.

Sewell Cadillac benchmarks its cleanliness against hospitals and has adapted several medical technologies to help its mechanics achieve better results when diagnosing and fixing car faults.

Benchmarking employee satisfaction The same principles hold for measuring and comparing the satisfaction of any stakeholder group. You’ll only get an accurate reflection of how satisfied or dissatisfied they feel if you use the same criteria they use to make that judgement.

Although employees’ requirements vary less from one organisation to another than those of customers, they’re by no means identical. It’s therefore completely misguided that you can use a standard list of questions to get a reliable measure of employee satisfaction. You must consult employees and base your questionnaire on the factors that are most important to them.

Benchmarking databases The American Customer Satisfaction Index (www.theacsi.org) is by far the biggest customer satisfaction database since it purports to cover 60% of the US economy. There is no UK equivalent.

Closest is The Leadership Factor’s Satisfaction Benchmark database (www.leadershipfactor.com/surveys/) compiled using data from around 40 customer satisfaction surveys per month across all sectors. S Satisfaction Index™ League Table 50%

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Malcolm Gladwell, The Tipping Point to get round our increasing scepticism for traditional advertising media. Increasingly these social epidemics are being associated with the internet, email and new media.

The internet certainly seems to have facilitated the speed and reach of social epidemics (much the same effect that the transport revolution had on diseases).

Memes and social epidemics spread through the surprisingly small world of the internet like wildfire. Popular internet memes include the Star Wars Kid, Badger Badger Badger and more recently the Flying Spaghetti Monster. Occasionally businesses have managed to shoehorn their way into this arena, mostly by abandoning any pretence of relevance to their product - Burger King’s Subservient Chicken is a case in point

(http://www.subservientchicken.com).

So what’s new?

A “Tipping Point” is the moment at which something reaches a critical mass and grows astonishingly quickly. Normally what we’re talking about is social phenomena, and drawing the analogy from the behaviour of diseases they are often referred to as social epidemics. This is an enduring metaphor, as Gladwell points out there are three key similarities:

According to Gladwell it takes a combination of three special types of people to kick off an epidemic:

Connectors are the people who know everyone, the ones who collect acquaintances. You are probably familiar with the notion of “six degrees of separation” or the small world phenomenon. Recently it has become obvious that the reason this works is because of connectors, who act as “hubs” that connect various otherwise separate social networks. Word of mouth remains the most powerful and effective way of spreading a message. Connectors tend to inhabit several worlds, bringing them together and allowing new ideas and connections to form. Connectors get people together and spread a message quickly.

Exponential growth (starting at 1, doubling in each generation) 8000

7000

They also grow exponentially - meaning that the speed of “infection” is proportional to the number already infected. Exponential growth can be staggeringly fast:

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People

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1. Contagiousness 2. Little causes can have big effects 3. Change happens not gradually, but at one dramatic moment

For some time now marketers have sought to use (or abuse) social networks in order to achieve these kinds of adoption rate for their products. That’s why they employ coolhunters (see Salesmen later on), and tactics such as Viral marketing. They’re also hoping

36

Lot’s of people have commented on the social epidemic phenomenon. What makes The Tipping Point valuable is his

analysis of why, or perhaps how, they happen. More specifically he explains who makes it happen.

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New York Crime Rate Collapse One of Gladwell’s poster issues is the 1990s New York city crime crash. No one really knows why it happened, and he glosses over the debate about what precisely caused the crash to focus on the resultant social upheaval. The facts, as the chart shows, are startling: New York City Crime Rate (Source : http://wwwdisastercenter.com/crime/nycrime.htm) 7000

Index per 1000,000 Inhabitants

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As Gladwell points out the fall probably came about through a unique combination of a number of causes that on their own would not have been enough.

are people who acquire information about an area, and enjoy telling others about it. The friend you go to talk to when you want to buy a digital camera or a hi-fi and you want the best deal is a Maven. They know a market intimately, know what the best products are and what is a fair price, and enjoy sharing knowledge with others. In a social epidemic Mavens provide the information.

Mavens

Salesmen are people who are good at influencing others. The name is a bit misleading though, often salesmen (and women!) work just by being themselves, rather than by actively trying to promote something. Salesmen are cool, and cool is tremendously powerful.

Gladwell makes the point in relation to teenage smoking: ...”the anti-smoking movement has railed against the tobacco companies for making smoking cool and has spent untold millions...trying to convince teenagers that smoking isn’t cool. But

that’s not the point. Smoking was never cool. Smokers are cool.”

a product or idea, and often it is little changes that make a big difference.

Portrait of an epidemic The Law of the Few Certain people (the ones outlined before) have a disproportionate influence over the spread of social phenomena. Small numbers of the right people can start an epidemic, but without them nothing will happen. Gladwell points out that Paul Revere was not the only rider to bring news of the Redcoats coming, but he was the only one to raise a response because he had a wide circle of acquaintance. So to start an epidemic around your product you just need to find the right people.

Stickiness Some products and ideas, or perhaps rather some ways of packaging information about them, are sticky - they are irresistibly attractive to people. By presenting things in the right way you can have a huge influence over the success of

Kitty Genovese and the bystander problem In 1964 a young woman was stabbed to death in New York, having been attacked three times over the course of half an hour. 38 people watched it happen, but none of them called the police. At the time this was thought to indicate the coldness and psychological isolation of city living. In fact it now seems that the reason no-one did anything is because there were 38 people - everyone assumed that someone else would act. If there had only been one witness then the chances are they would have done something.

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Continued: Malcolm Gladwell, The Tipping Point

The Power of Context Behaviour is strongly influenced by context. This is the rationale behind the idea that zero tolerance policing could cut violent crime. More depressingly this also explains the “bystander problem” typified by the story of Kitty Genovese. In general we tend to overestimate the role of individual character traits and underestimate the importance of environmental context in motivation.

The Magic Number 150 Sociological theory states that a human can only have a proper social relationship with up to 150 people. Groups larger than this tend to subdivide, and this often works out best for the health of the group.

Similar trends can be observed with other apes (chimps, for example, also show a tendency to split when groups get over a

certain size). For an entertaining take on this head to

http://www.pointlesswasteoftime.co m/monkeysphere.html Group size and the rule of 150 is therefore fundamental to understanding social behaviours, and is one of the most important contextual influences on social epidemics. These groups are also a mechanism that makes it far easier for new ideas and information to “tip” from one person to the entire group.

The New Product Cycle Another theory that sheds light on the operation of social epidemics is Rogers’ model of adoption: (see below) The few key individuals (Connectors, Salesmen and Mavens) are essential in

The adoption bell curve

Innovators (2.5%) Early adopters (13.5%) Early majority (34%) Late majority (34%) Laggards (16%)

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setting trends, making things “cool” and informing people before kicking off an epidemic that spreads rapidly through the early and late majorities.

Conclusion The key lesson of The Tipping Point is that it is the right combination of little things that is the secret to triggering any social epidemic (including a rush on your product). You need to focus all your effort on a few key people in order to use this theory in your marketing.

The other key is that apparently minor elements of context and presentation can have a counter- intuitively large impact on the spread of a social epidemic. Why did the Subservient Chicken spread so successfully when so many other Viral campaigns fail? It’s hard to be sure, but it will come down to little things about context and targeting the right few people.

An interesting aspect of the information age recently is the growing power of bloggers - many of whom combine aspects of Connector, Maven and Salesman. Figuring out how to target marketing through this channel will be one key to online campaigns this century. S

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Nigel Hill Founder of The Leadership Factor

BJ Cunningham Brand Expert

Robert Crawford Executive Director of the Institute of Customer Service

Graham Parker-Gore Head of Customer Implementation Services at VISA Europe

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